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JAKARTA, Indonesia (Jakarta Post/Irian News) - Energy firm BP Indonesia, the Indonesian unit of UK energy giant BP, plans to build a liquefied natural gas (LNG) facility to avert gas shortages in West Java.

"The project will be the first LNG regasification terminal in Indonesia and will provide an innovative long-term solution that will complement in situ West Java gas reserves," the company said.

BP said the project has been under study since 1999.

The offshore facility is to be built in West Java, where LNG shipped by tankers will be stored and regasified. The gas will then be piped to consumers through offshore transmission facilities.

Construction is to be completed in 2007 and the facility initially will supply 500 million cubic feet per day of gas.

The terminal will be supplied with LNG mainly from the Tangguh gas field located in the Bird's Head area of Papua.

The cost of the project, estimated at US$ 80 million including the cost of the pipeline, will be fully funded by private investment.

Gas from the facility will be used to meet new demand arising from economic growth and to back-fill demand from the removal of subsidized diesel fuel.

It is estimated that West Java will face a gas supply shortage of 500 million cubic feet per day by 2005. Currently, power plants owned by state electricity company PT PLN and large industries in West Java consume the diesel equivalent of 600 million cubic feet per day of gas.

The project is expected to result in increased revenue for the government from the development and supply of gas, and reduce the high costs of diesel consumption. Savings from the project are expected to amount to Rp .7 trillion per year.

Construction of the new facility will support the government's campaign for the use of gas, aid the development of Papua and strengthen economic ties between the eastern and western regions of Indonesia.

BP and PLN have signed a memorandum of understanding to jointly study the possibility of using the new facility as a gas source for PLN's power plants in West Java, with the study expected to be completed by the end of this year, the statement said.

KABAR-IRIAN ("Irian News") Websites: http://www.irja.org/index2.shtml and http://www.kabar-irian.com

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